The Collapse of The Rial - A Warning To The Eurozone

Iran's rial is collapsing, following an "innovation" last week by the Iranian government to supply importers with dollars via an "exchange centre".

Unsurprisingly, people have scrambled to exchange rials for dollars.

Reuters reports that the rial fell by at least 9% today:

"The rial was trading at about 37,500 to the dollar, down from around 34,200 at the close of business on Monday, a foreign exchange trader in Tehran told Reuters. Other Tehran traders said the rial had dropped even further, to 38,000 or 40,000."

The Iranian industry minister, demonstrating a typical politician's lack of understanding of how markets work, said that he hoped security services would root out speculators whom he blamed for the drop.

It would be ironic if the downfall of the Iranian government was brought about, not directly by sanctions or war, but by their lack of understanding of how markets work; ie their own hand.

The bureaucrats of the Eurozone should take note, markets are driven by fear and greed; ill advised attempts to control and manipulate them always end in tears!

Greece Oil Shock

In January I warned that the EU embargo on Iranian oil would cause Greece problems:

"There has been much hype and sanctimonious puffing of chests from the EU about its agreement "in principle" to ban imports of oil from Iran.

However, as Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.

Were Iranian oil imports to be banned, where would Greece get its oil from?

Saudi Arabia?

Maybe, but at an economy busting $150+ per barrel.

As with all EU "plans" this one has not been thought through."

In February I noted that:

"They are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."

As predicted, things are not going well; as reported by News.AZ:

"The EU has postponed an April deadline to review the impacts of the bloc’s embargo on oil imports from Iran due to Greece's concerns on finding new oil suppliers."

As ever with all EU "plans", no one has bothered to think through the consequences of them.

Greece's Oil Shock

In February I wrote that Hellenic (Greece's main oil refiner):

"are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."

Today Hellenic have announced that it has suspended purchases of Iranian crude in April, as approaching sanctions on Tehran have made banking payments virtually impossible.

This of course means that its negotiations for reasonably priced supplies for Greece from elsewhere have just been torpedoed.  

Hardly good news for the imploding Greek economy!